Imagine Merger Between EMC and HP

Divorcing is becoming a common practice these past days for big companies in the worldwide storage industry.

1/ Symantec decided to split the company into two new entities, one for storage and another one for security. The company entered really in storage with the acquisition of Veritas Software for $11 billion in 2005. But it appears that there was few relations between storage and security in term of business, for example between Norton on one side, NetBackup and BackupExec, on the other side. It took nine years for Symantec to figure that out and the split could be done much earlier. “It has become clear that winning in both security and information management requires distinct strategies,” said now Symantec CEO Michael Brown.

2/ Activist investor Elliott Management publicly urges EMC to spin off VMware as their respective business is not complementary and sometimes competing with its own software and VMware storage customers needing to integrate the dominant virtualization platform.

3/ HP plans to separate into two public companies, one for server, storage, networking, one for PC and printing.
 
Of course, the official reason of these deals is to add value to the shareholders of all these storage giants. But another important one is that, following their split, it will be easier to sell or to merge one part of them.

There were US rumors that HP and EMC could merge. It could happen now with less difficulty as EMC never was interested in PCs and printers. Also it never wanted to enter into servers or networking but it could accept it for a while before selling these two activities or strengthening its position in converged infrastructure. As we commented earlier, firms involved in servers are less successful in storage these days.

Imagining a merger between EMC and the new part of HP in server, storage, networking. What about storage only?

The only successful part of HP storage is 3par in double digit-growth, especially in the mid range, the entire storage activity decreasing regularly since a long time. EMC never was enthusiastic concerning another sector of HP, tape. For the rest, in storage software or all SSD systems, EMC has a huge portfolio and all the products on its side and once more does not need HP. There is also some overlap between Autonomy and Documentum.

But 3par is in direct competition with VNX with totally different architectures.

It was the same when EMC acquired Isilon also not compatible with VNX but the situation was not identical because Isilon scale-out NAS are aimed at other customers needing high transfer rate rather than access time, like companies in media and entertainment, oil and gas. That’s why EMC kept Isilon as a separate business.

It could do the same for 3par but with the difficulty to have to offer either VNX or 3par for the same customers. In a merger with HP storage, bigger EMC will be the dominant player and will then probably privilege VNX.

But, at the end, such a storage merger will not be at all a win-win operation.